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Ratings report contradicts mayor, media

By Eric T. Campbell
Michigan Citizen Newspaper

DETROIT — Ingham County Judge William Collette denied July 11 a motion filed by Corporation Counsel, Krystal Crittendon, to reconsider a ruling on the legality of the city’s Fiscal Stability Agreement (Consent Agreement) with the state.

In the wake of Crittendon’s court filings, Mayor Dave Bing has publically called for her resignation, saying her actions have cost the city millions in potential investments and increased interest rates.

During the drafting and review of the Consent Agreement, Bing circumvented the City Law Department entirely and consulted with outside attorneys from Miller Canfield.

In a June 21 letter to City Council, Crittendon detailed why her actions did not, in fact, put the City in financial jeopardy, as repeatedly stated by Bing, CFO Jack Martin and state officials.

Crittendon’s letter cites reports by bond ratings companies, which indicate the mayor exaggerated the characterization of the city’s bond rating status.

Attached to that letter are reports by Fitch, Standard & Poor’s and Moody’s, all stating that Detroit’s bond ratings remained relatively stable throughout the weeks before and after Crittendon’s lawsuit was filed.

Standard & Poor’s issued a June 13 bulletin entitled, “Ratings On Detroit, MI. Unchanged Following Dismissal of Consent Agreement,” stating that a “B” rating on the city’s general obligation tax bonds remained unchanged throughout the crisis.

Furthermore, Crittendon wrote that an independent bond attorney assessed Detroit’s long-term bonds would not be devalued if the court judged that the Consent Agreement was illegal.

Deputy State Treasurer Thomas Saxton’s letter to city officials, dated June 7 indicated the state would withhold $137 million in long-term bonds if Crittendon proceeded to challenge the Consent Agreement in court.

About $80 million of that money was intended to retire a short-term bond taken out with the Michigan Finance Authority in March 2011.

Crittendon’s letter to Council argues that the state had no claim or any right to threaten to withhold those monies, because the MFA is a separate and autonomous entity.

“The city has not challenged any of the agreements with the MFA,” Crittendon wrote. “Unlike the state, the MFA is not in default to the city. Other than the state treasurer, chair of the MFA, no one is known to have called into question the validity of the City’s agreements with the MFA.”

Mayor Bing has also publically stated that Crittendon had legal latitude and could have found alternative paths to addressing the perceived Charter violation.

To this, Crittendon responded in her letter, “Corporation Counsel is required to take all reasonable actions to secure compliance with the Charter, including, but not limited to, judicial action.” In this case, the Law Department had already provided notice and an opportunity to cure to the Mayor and City Council. The only course left which could be taken was to ask the court to determine whether entry into the FSA violated the Charter and the Michigan Home Rule City Act.”

Five members of the Detroit City Council signed the Financial Stability Agreement with the state of Michigan on April 4.

City Council discussed Crittendon’s letter during a July 10 session. Councilmember Gary Brown proposed a motion to seek clarification from Michigan Attorney General Bill Schutte on the role of Corporation Counsel under the revised City Charter

“What I’m asking for is a narrow definition of Corporation Counsel’s ability to trump city officials,” Brown said during the meeting.

Brown’s motion was ultimately withdrawn after it received no support. Most council members agreed that more internal deliberation was required before seeking legal actions or opinions from the state.

Councilmember Kwame Kenyatta acknowledged that attorneys at the state level have looked at the Charter previously and approved the current language.

“They (the state) don’t want the clarity,” Kenyatta said. “They just don’t like the Consent Agreement being challenged.”

Council scheduled a closed session with Crittendon, to be held at an undetermined date.

“We should be able to fix this ourselves,” said Councilmember Ken Cockrel, Jr.

He added later, “We need to look before we leap.”

Crittendon’s initial motion was filed June 1. It cited the City Charter and the state Home Rule Act prevented the City from entering into a binding agreement with an entity that is considered in default. She re-filed her motion July 6 indicating Judge Collette made his first decision without considering the city’s 2012 Charter language.

Contact Eric T. Campbell at ericcampbell@michigancitizen.com

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